Venture funding in Asia continues to say no, hitting its lowest level in almost a decade last quarter.
Total investment dollars for Asian startups fell to $13.2 billion, the smallest total since it hit $13 billion in the first quarter of 2015, based on Crunchbase data.
The figure also represents a 13% decline from the second quarter and a massive 44% drop from last 12 months, when the total reached $23.8 billion.
Deal flow also continued to say no, with just 1,509 deals announced in the third quarter, an 8% decline in comparison with the second quarter and a 23% decline in comparison with last 12 months.
Even the AI craze couldn’t save the variety of ventures in the third quarter, as AI startups in Asia raised only $2.1 billion, down 20% from the second quarter and the same as in last 12 months.
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Fighting in late rounds
The biggest perpetrator in Asia’s declining enterprise finance fortunes stays late-stage growth rounds. The total value of such rounds was just $5.8 billion, down 30% from the second quarter and down 62% from the $15.3 billion raised by late-stage startups last 12 months.
This figure also represents the lowest total amount of late-stage funding in Asia since 2015.
Large rounds were few and infrequent, but included:
- AI startup based in China Baichuan’s intelligence raised $390 million in Series A funding.
- A Chinese company producing chips for automotive applications XLMEC raised almost $344 million.
- An e-grocery startup based in India Zepto raised $340 million Series G.
- A Chinese artificial intelligence company Moonshot AI raised a $300 million round.
Deal flow remained the same as in the second quarter, with 139 rounds announced, but this represented a decline of 17% in comparison with the third quarter of last 12 months.
Early stage of stagnation
Strong early-stage performance does not make up for the collapse of late-stage rounds, and Asia’s performance here was even worse from a enterprise capital perspective.
The numbers dropped – but not as dramatically as they did in the late stages. Early-stage startups raised $5.6 billion last quarter, up 12% from the second quarter but down 17% from the $6.8 billion raised last 12 months.
In the second quarter, deal flow remained relatively stable as 508 deals were accomplished. However, this was a decline of twenty-two% in comparison with the same quarter last 12 months.
Mixed seeds
Seed and angel rounds declined 9% from the second quarter to $1.8 billion. This number actually represents an incremental increase of 6% over last 12 months, when angel and seed rounds totaled just $1.7 billion.
However, transaction volume declined significantly this quarter. Only 862 angel and seed rounds closed in the third quarter, down 10% from the second quarter and 25% from last 12 months, when 1,152 such rounds were announced.
Division of the country
It’s no surprise, then, that China’s collapse in long-term ventures is one of the most important aspects affecting Asia’s financing fortunes. China-based startups raised only $6 billion in the third quarter, a modest decline of 19% from the second quarter, but an astonishing 61% decline from the third quarter of last 12 months.
Israeli startups have similarly struggled, having raised only $700 million – down 23% from the second quarter and 6% from a 12 months ago – as conflict in the region continues.
The only vibrant spot on the Asian enterprise front could also be Japan. Japanese startups raised $1.3 billion, a massive increase of 95% in comparison with the second quarter and 58% in comparison with last 12 months. This included a nearly $133 million Series E round for the human resources startup Smart HR.
What does it mean
While it is necessary to keep in mind that Asia is not the only market to see a decline in enterprise capital funding – global enterprise capital funding in the third quarter was down 16% quarter-over-quarter and 15% year-over-year – its year-over-year decline was much more significant .
One reason apparently appears to be artificial intelligence. Globally, AI startups grew to almost $19 billion in the third quarter, or 28% of all enterprise dollars.
However, the Asian AI enterprise market appears to be lagging behind, with AI firms providing only 16% of start-up funding in the region in the third quarter and only 17% in the second quarter.
While funding for AI startups appears to cover up several problems in the global enterprise market, Asia is not reaping the same advantages.
Methodology
The data in this report comes directly from Crunchbase and is based on reported data. The data provided is as of October 2, 2024.
Please note that data transfer delays are most noticeable in the earliest stages of a enterprise, with seed funding amounts increasing significantly after quarter/12 months end.
Please note that every one financing amounts are in US dollars unless otherwise noted. Crunchbase converts foreign exchange to U.S. dollars at the spot rate in effect on the date financing rounds, acquisitions, IPOs and other financial events are reported. Even if these events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historical spot price.
Glossary of financing terms
Effective January 2023, we have modified the way we include corporate financing rounds in our reporting. Corporate rounds are only included if the company has raised seed financing as a part of a series financing round.
Seeds and Angels consist of seed, pre-seed and angel rounds. Crunchbase also includes enterprise rounds of unknown series, equity crowdfunding, and convertible notes with a size of $3 million (in U.S. dollars or a U.S. dollar equivalent) or less.
The early stage consists of Series A and Series B rounds, in addition to other forms of rounds. Crunchbase includes enterprise rounds of unknown series, corporate ventures and other rounds above $3 million and those valued at lower than or equal to $15 million.
The Late Stage consists of Series C, Series D, Series E, and later lettered expedition rounds following the “Series [Letter]“Naming convention. Also included are enterprise rounds of unknown series, corporate ventures and other rounds valued at greater than $15 million.
A technology development is a private equity round led by a company that has previously raised a “venture” round. (Basically any round from the pre-defined stages.)